Bubble Benefits

Slate's Daniel Gross has a new book out, Pop! Why Bubbles are Great for the Economy. It's an interesting argument: while bubbles are wasteful, oftentimes (1) there are a few enduring successes, and (2) even the failures can leave behind valuable infrastructure that then gets consolidated and reused by sounder post-bubble businesses.

EBay, Amazon, and Google all survived the recent dot-com boom. Moreover, there was a huge buildout of telecommunications capacity that is finally starting to be used effectively. Less obviously, bubble times can also result in "mental infrastructure." One form this takes is fundamental changes in consumer behavior. Huge amounts of advertising dollars were spent in the 90's convincing people to shop and invest online. Now that people accept that these are reasonable things to do, new businesses benefit.

A second form of mental infrastructure is training for service providers. The dot-com era generated new programming practices (e.g. agile methodologies, design patterns), a wealth of documentation, new publishers (O'Reilly, Pragmatic Studios), schools, and huge numbers of trained software engineers, designers, testers, project managers, and on and on.

It's this latter piece that's of potential interest for scientists and engineers. Academia is incredibly slow to react to changes in the market for a whole host of structural reasons, and as a result, there are substantial excesses of PhDs cranked out in many fields. Bubbles can offer an out for these newly minted graduates by providing for some a relatively easy direction in which to make a lateral career move.

Right now there are at least 2 areas in which there is bubble-like activity: Web 2.0 companies and quantitative finance. I'm currently in Portland at RailsConf, and it's a bit of a Web 2.0 developer frenzy. Dozens of new little companies are hiring, and there is buzz about all sorts of interesting projects going on. If you're smart, Ruby on Rails is easy to pick up, and it's a pretty good plan B. As for quantitative finance, over on jobs.phds.org there are a couple dozen new ads for quantitative analysts every week. A fair number of the ads are for mathematicians / physicists with no prior finance experience, and the pay well into 6 figures, even for the entry level positions.

Now neither of these areas is going to give you tenure-level job stability. The bottom is going to fall out sooner or later in both; probably sooner with the hedge funds. However, in both cases the pay is substantially greater than what you'd get as a postdoc (by a factor of 3 to 5), and you'll acquire skills that you can use in whatever you do next. Which makes more sense economically? 3-5 years as a postdoc earning $35K and preparing for an incredibly scarce tenure track job? Or the same amount of time earning far more as a developer or a quant? There's considerable uncertainty about next steps in either case, but at least in one you're getting paid.

I think the real challenge for PhDs is more of an attitude adjustment, namely accepting that:

• your education is a sunk cost,
• research is not necessarily the One True Path,
• you are still a fine person even if you don't write papers for a living, and
• you always have to learn and adapt your skills.